“Death is so terribly final,” as George R. R. Martin said. It’s the last stop after years, or less, of existence. Or so we’ve been told. Nevertheless, death is the inevitable end. And if you’ve been here long enough, you might have a thing or two that you love or that are worth a significant amount. Who gets what then? You might want to be in control of who gets ahold of your trusty assets. But, how can you pass on your crypto after death? Does the blockchain make it more complicated? Let’s dive deep into how crypto inheritance works.
What Does Crypto Inheritance Mean?
Crypto inheritance is the process of passing on cryptocurrency assets, like Bitcoin and Ethereum, alongside the cryptographic keys to specific people after the person’s death. It follows the same concept of traditional inheritance. You write down in your will who you’d like to get your holdings and the percentage for each individual. And all your assets are transferred through legal procedures and documentation.
But the inheritance issue isn’t this easy in Web3. Cryptocurrencies are decentralized, so no single point of authority can handle these cases. Only you have access to your cryptographic keys locking away your assets. If you don’t set a plan before your forever goodbyes, your crypto will remain forever inaccessible.
Is Crypto Inheritance More Complicated than Traditional Inheritance?
Crypto inheritance is more complicated than traditional inheritance. Of course, crypto inheritance has the advantage of being built within a decentralized ecosystem. Parties, therefore, don’t have to rely on intermediaries like banks or legal representatives.
Privacy and Legal Concerns
Web3’s decentralization might be at the expense of the departed’s privacy. Beneficiaries may have to navigate privacy-related challenges which may lead to the exposure of the deceased’s private information. Moreover, legal regulations aren’t clear around cryptocurrencies yet. So this might make the process harder.
Beneficiaries must understand crypto terms and technical concepts like private keys, public addresses, wallets, transactions, and blockchain technology to access and use the assets. And navigating crypto on the blockchain isn’t everybody’s cup of tea so this adds to the burden.
Market volatility doesn’t necessarily complicate the crypto inheritance process. But it’s a valid concern for many. We all know how unstable the crypto market is, and how it can pump and dump in minutes. We’ve seen crashes like the FTX collapse causing the entire market to fall on itself. So, maybe the assets that were once worth millions of dollars can be worth nothing at the time of inheritance. Or vice versa. This volatility is limited in real-life assets like cash and houses.
How Does Crypto Inheritance Work?
There are multiple ways through which you can pass on your crypto after death. You can either do it by directly getting in contact with the beneficiary or go down a more complicated path.
You directly contact the person to whom you want to pass on your crypto. This requires you to let them know beforehand, obviously, about the amount they’d get, and how they can access it. So, you would have to give them your private keys and your secret recovery phrase.
This involves using a multi-signature wallet, meaning multiple keys are distributed among individuals. A certain number of participants are required to sign before validating transactions. You can use multisignature wallets in crypto inheritance by distributing keys among the beneficiaries.
Time-Locked Crypto Inheritance
Time-locked crypto inheritance involves setting specific conditions or waiting periods before anyone can access your digital assets. This is especially useful if you only want someone to access the crypto after reaching a certain age.
Smart Contract Based
You can use smart contracts on the blockchain to set specific conditions for the transfer of digital assets. Smart contracts run automatically once their pre-determined conditions have been met, such as the owner’s death or specific timeframes.
Custodial Crypto Inheritance
Custodial crypto inheritance requires including a third party to manage the process of passing the crypto from one person to another. The custodial holds the assets on behalf of the owner and ensures their secure transfer based on the owner’s instructions.
How To Include Your Crypto In Your Estate Planning?
The easiest way to ensure the secure and definitive transfer of your crypto is to include them in your will. Your digital assets are treated like any other assets in your estate planning. During this process, you’re most likely going to have to write down important account information and passwords.
But, estate planning might be more difficult when it comes to your crypto. Given that most jurisdictions in the world don’t recognize digital assets, it’s important to ensure the country you live in recognizes your crypto. So, it’s better to work alongside a lawyer who can offer you the personal guidance you need.
All in all, you can pass on your crypto to whoever you want. Having said that, who will inherit Satoshi’s alleged 1 million Bitcoin? Who even is Satoshi Nakamoto?